Auditing and Assurance Principles Quiz No. 4

Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction

Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022
AUDITING AND ASSURANCE PRINCIPLES

Fundamentals of Assurance Services
Quiz No. 4
Prepared by:
Germa D. Cosep, CPA
1. Which of the following is least likely an advantage to the client and the auditor as a result of early
appointment of the auditor?
a. The audit will be completed expeditiously.
b. The auditor will be able to perform the examination more efficiently and will be finished at an
early date after the year-end.
c. The auditor will be able to complete the audit work in less time.
d. Potential problems are identified and resolved on a timely basis.
2. Which of the following procedures would an auditor be most likely to perform in planning a financial
statement audit?
a. Performing analytical procedures to identify material fraud and material error.
b. Performing analytical procedures to identify areas that may represent specific risks.
c. Obtaining a written representation letter from the client to emphasize management's
responsibilities.
d. Reading the minutes of stockholder and director meetings to discover whether any unusual
transactions have occurred.
3. The primary purpose why an auditor obtains an understanding of the entity and its environment is to:
a. Develop an attitude of professional skepticism concerning management's financial statement
assertions.
b. Make constructive suggestions concerning improvements to the client's internal control.
c. Understand the events and transactions that may have an effect on the client's financial
statements.
d. Evaluate whether the aggregation of known misstatements causes the financial statements
taken as a whole to be materially misstated.
4. Auditors allocate the preliminary judgment about materiality to account balances. Such preliminary
materiality is known as:
a. Tolerable error.
b. Planning materiality.
c. Tolerable misstatement.
d. Tolerable materiality.
5. Which of the following is least likely a potential effect of an auditor's decision to reduce acceptable audit
risk at low level?
a. Special care is required in assigning experienced staff.
b. Review of the working papers by personnel who were not assigned to the engagement.
c. More evidence is required.
d. Less evidence is required.
6. Which of the following is not an information source for developing analytical procedures used in the
audit?
a. Key relationships among financial statement elements.
b. Relationships between financial and relevant nonfinancial data.
c. Comparison of current year financial data with projections for next year's financial results
d. Comparison of financial data with anticipated results.
7. A CPA is conducting the first examination of a non-public company's financial statements. The CPA
hopes to reduce the audit work by consulting with the predecessor auditor and reviewing the
predecessor's working papers. This procedure is
a. Acceptable if the CPA refers in the audit report to reliance upon the predecessor auditor's work.
b. Required if the CPA is to render an unqualified opinion.
c. Acceptable if the client and the predecessor auditor agree to it.
___________________________________Modular Home Instruction__________________________________
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Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022
d. Unacceptable because the CPA should bring an independent viewpoint to a new engagement.
8. Which of the following concepts of materiality is incorrect?
a. Materiality is based on quantitative and non-quantitative factors.
b. Materiality is a matter of professional audit judgment.
c. Materiality does not apply if internal control is highly effective.
d. Materiality is more closely related to the fieldwork and reporting standards than to general
standards.
9. Which of the following statements is incorrect about materiality?
a. The concept of materiality recognizes that some matters are important for fair presentation of
financial statements in conformity with GAAP, while other matters are not important.
b. An auditor considers materiality for planning purposes in terms of the largest aggregate level of
misstatements that could be material to any one of the financial statements.
c. Materiality judgments are made in light of surrounding circumstances and necessarily involve
both quantitative and qualitative judgments.
d. An auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of
a reasonable person who will rely on the financial statements.
10. The risk that the audit will fail to uncover a material misstatement is eliminated
a. When the auditor has complied with generally accepted auditing standards.
b. If a client has strong internal controls.
c. If a client follows generally accepted accounting principles.
d. Under no circumstances.
11. The probability of an auditor's procedures leading to the conclusion that a material error does not exist
in an account balance when, in fact, such error does exist is referred to as
a. Prevention risk.
b. Inherent risk.
c. Control risk.
d. Detection risk.
12. In designing written audit programs, an auditor should establish specific audit objectives that relate
primarily to the
a. Financial statement assertions.
b. Timing of audit procedures.
c. Cost-benefit of gathering evidence.
d. Selected audit techniques.
13.
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Prelim Period (August 9, 2021- September 17, 2021)

Burauen Community College Modular Home Instruction

AUDITING AND ASSURANCE PRINCIPLES

_Modular Home Instruction

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